For the 1st Time After 100 years: WAY of 91 Day Maturity Greater than 182, 364 Day Maturities
By Paneetha Ameresekere
Market distortion was exemplified at yesterday’s weekly Treasury T-Bills auction, where for the first time after 100 years since the issuance of T-Bills were first begun in 1921, the weighted average yield (WAY) of the 91 day maturity was higher than both the WAY of the 182 and the 364 day maturity respectively. The WAY fetched by the 91 day maturity yesterday was 8.39 per cent, whereas the WAYs fetched for the 182 and 364 day maturities were 8.16 per cent and 8.17 per cent, respectively.
The genesis of this distortion began when Central Bank of Sri Lanka (CBSL) sold the largest amount of 91 day maturities ever, a total of Rs 74,250 million at a WAY of 8.39 per cent, up 35 basis points (bps) week on week at yesterday’s Rs 74, 500 million T-Bill auction, its second largest ever, to settle Rs 72, 521 million of all maturities which have to be repaid by Friday. In the five consecutive weeks to yesterday, the WAY of the 91 day maturity has increased by 231 bps, since CBSL semi-liberalised Treasury Bill yields beginning with the T-Bill auction of 22 September, due to a combination of inflationary pressure and uncertainty.
Yesterday’s Rs 74,250 million sale of 91 day maturities was equivalent to 371.25 per cent of the original offer of Rs 20,000 million 91 day maturities up for sale. It was also equivalent to 99.66 per cent of all maturities sold at yesterday’s auction. In respect of the other two maturities on offer, namely the 182 and the 364 day maturities, CBSL sold only 0.91 per cent (Rs 200 million) and 0.15 per cent (Rs 50 million) of their original offers of Rs 22,000 million and Rs 32,500 million, respectively.
The WAYs fetched for the 91 and 182 day maturities yesterday were 8.16 per cent and 8.17 per cent, up 96 and 89 bps each over its 6 October WAYs. Last week, the offers for both of these two maturities were rejected by CBSL in order to rein in WAYs. The WAY of the 364 day maturity since the 15 September weekly T-Bill auction to yesterday has risen by 220 bps and that of the 182 day maturity since the 1 September auction by 220 bps. In the weekly T-Bill auctions held on 8 September and 15 September, CBSL rejected all offers made for the 182 day maturity.